Oil: Price holds above US$67 as hurricane hits US

Oil eased from record-highs but kept above US$67 a barrel on Friday due to fears of disruptions to US supplies, with oil and gas workers in the Gulf of Mexico being evacuated because of Hurricane Katrina.

The lofty prices are creating worries over economic growth as governments, businesses and consumers suffer from high fuel bills.

US light crude was down 36 cents at US$67.13 a barrel by 0700 GMT, after hitting US$68 at one point on Thursday, the highest since US crude futures started trade in 1983.

London Brent crude was down 33 cents at US$65.94 by 0701 GMT.

A sabotage blast hit an exporting oil well in Iraq's Kirkuk oilfield in the north, an Iraqi oil official said on Friday, adding to existing supply concerns.

The well produces 7,000 to 10,000 barrels per day (bpd) and is part of a network that feeds a pipeline to Turkey. Exports of Kirkuk crude have been patchy over the past two years due to a relentless guerilla campaign, forcing Iraq to rely on its fields in the south.

Hurricane Katrina hit Florida's densely populated southeast coast on Friday, leaving 2 million people in darkness as power lines came down.

"We are still in the hurricane season and hurricanes seem quite active this year. So everyone will continue to be sensitive about weather news and any disruptions," a trader in Japan said.

The 11th-named storm in the Atlantic hurricane season forced some oil and gas producers to start precautionary evacuations of workers from the Gulf of Mexico, where the United States derives 20-25 per cent of domestic crude and natural gas output.

"The impact of Katrina is a bit limited now. But there will be more to come," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

No disruptions to oil supply have been reported yet, but Shell Oil said it would evacuate 120-non essential personnel from offshore operations in the eastern Gulf of Mexico on Thursday and Friday.

"While most forecast models indicate Katrina will remain east of Shell's Gulf of Mexico operations, we will continue to treat the storm with caution," said Shell

An unusually active Atlantic hurricane season could culminate in as many as 21 tropical storms and 11 hurricanes, forecasters said. Storms in the Gulf of Mexico have shut more than 6 million barrels of crude oil production so far this year.

Adding to the list of supply concerns, leading Japanese refiners suspended waterborne operations at some of their facilities in eastern Japan for a second day on Friday after a powerful typhoon made landfall in the area.

ECONOMIES HIT

While there are signs of easing tensions in some producing countries, market participants remain concerned about a thin stock cushion after a spate of disruptions and as oil producers pump flat out.

Asia's economic growth is remarkable and will stay on track for this year and 2006, but serious risks remain due to high oil prices, the International Monetary Fund's chief said on Thursday.

Strong oil prices are acting as a check on building optimism about Japan's economic prospects, analysts say.

Indonesia announced on Thursday plans to end costly fuel subsidies and insisted it had complete control over its economy, seeking to shore up investor confidence battered by a falling currency and debilitating oil prices.

But fears of a full-blown crisis have emerged as surging oil prices are dealing a double-blow to the Indonesian economy.

Ecuador protesters, whose attacks slashed oil exports from the South American crude producer, struck a deal with energy companies on Thursday in which the firms agreed to invest more in the poor communities where they operate.

Output from state oil firm Petroecuador climbed back to 158,000 bpd on Thursday, but was still under the 201,000-bpd average before the attacks.

In another sign of easing concern, Nigerian blue collar oil workers' union NUPENG would not halt oil exports even if it joins any general strike called to protest an expected increase in local fuel prices, a union leader told Reuters on Thursday.

Previous government attempts to raise prices have led to crippling general strikes in the world's 8th-largest oil exporter.

- REUTERS